Consumer Decision Making

Consumer Decision-Making Models, Strategies, and Theories, Oh My!

By Michael Richarme

How do consumers make decisions? This question is at the core of much of marketing examination over the past 60 or 70 years. As marketers manipulate the various principles of marketing, so do the consumers they seek to reach–choosing which products and services to buy, and which not to buy, choosing which brands to use, and which brands to ignore. The focus of this paper is to examine the major decision-making models, strategies, and theories that underlie the decision processes used by consumers and to provide some clarity for marketing executives attempting to find the right mix of variables for their products and services. Nobel Laureate Herbert Simon proposed an alternative, simpler model in the mid-1950s. This model was called Satisficing, in which consumers got approximately where they wanted to go and then stopped the decision-making process. An example of this would be in the search for a new apartment. Under the Utility Theory, consumers would evaluate every apartment in a market form a linear equation based on all the pertinent variables, and then select the apartment that had the highest overall Utility Score. With Satisficing, however, consumers might just evaluate apartments within a certain distance to their desired location, stopping when they found one that was “good enough.” This theory, though robust enough to encompass many of the shortcomings of Utility Theory, still left significant room for improvement in the area of prediction. After all, if a marketing executive couldn’t predict consumer behavior, then what use would a decision-making paradigm be? Simon and others have extended this area in the investigation of the field of bounded rationality.

Three Decision-Making Models

Early economists, led by Nicholas Bernoulli, John von Neumann, and Oskar Morgenstern, puzzled over this question. Beginning about 300 years ago, Bernoulli developed the first...